The IMF Counted Votes on Venezuela. Britain Uses a Different Rule

Multilateral Finance

The Venezuela IMF question was never settled in a courtroom. It was settled by counting votes, and the answer arrived in April.

This week Caracas asked the world to unfreeze its money. The requests went to three different places, and the three answers are worth understanding.

Interim president Delcy Rodríguez wrote to King Charles about gold held in London. Foreign minister Yván Gil asked United Nations members to release blocked accounts held in various countries.

The third pot needed no letter. It was already open.

How the Venezuela IMF freeze ended

Venezuela’s access to its holdings at the Fund had been suspended since 2019. That was when Washington and its allies recognised Juan Guaidó, and the institution declined to rule on who governed.

The money then sat there for seven years. This year the Fund did something unusual.

According to its own announcement on April 16, Kristalina Georgieva declared the Fund was now dealing with the Rodríguez administration. It was guided by members representing a majority of total voting power.

That phrasing points to a canvass of the membership rather than a legal finding. The World Bank, following the same day, called it the Fund’s polling process.

The World Bank moved the same day and made its reasoning explicit. It said it was guided by the outcome of that polling process, and noted its last loan to Venezuela closed in 2005.

What Caracas can actually reach

The sums are larger than the gold everyone is arguing about. Venezuela’s reserve tranche position and drawing rights together come to roughly $4.9bn, on the Fund’s own figures.

That is two and a half times the bullion sitting under Threadneedle Street. It is also the money nobody is writing letters about, because that freeze lifted four months ago.

Rodríguez spoke the day after the earthquakes. She said Venezuela would create a reconstruction fund using resources held at the Fund, starting with $200m, about four percent of what it holds.

The Fund has not confirmed the mechanics. It was pressed at a briefing on June 25 about whether the money would come from drawing rights, when it would arrive, and whether Georgieva had spoken to Rodríguez.

The spokeswoman Julie Kozack said she had little to add so soon after the disaster.

Three custodians, three doctrines

Set the three requests side by side and the pattern is clear. Each institution asks a different question about the same government, and each gets a different answer.

The Fund asks what its members think, weighted by quota, and the members said yes. The World Bank asks what the Fund decided, and followed.

The Bank of England asks something else entirely. A ruling by Britain’s Supreme Court in 2021 tied access to whichever government London recognises, and London has not recognised this one.

So the gold is not frozen by sanctions. It is frozen because Britain declined to take the vote the Fund took, and its own courts have made that refusal binding on the vault.

What the Venezuela IMF opening means for investors

Reengagement matters far beyond the drawing rights. A full assessment of the Venezuelan economy, the first in around two decades, is now possible. A sovereign restructuring normally rests on exactly such an assessment.

Venezuela owes something in the region of $170bn across defaulted bonds, loans and arbitration awards. Bondholders have been buying on the expectation that a deal becomes possible once the Fund is back in the room.

Set against the earthquake, the arithmetic stays sobering. The Fund holdings and the London gold together would cover under a fifth of the $37bn of assessed damage.

What they would comfortably cover is the emergency. The United Nations relief appeal is short by $627m, a figure the Fund holdings alone exceed nearly eight times over.

Can Venezuela access its IMF money now?

Yes. The Fund resumed dealings with the Rodríguez government on April 16, restoring access to holdings worth roughly $4.9bn.

Caracas has announced an initial $200m draw for earthquake reconstruction. The Fund has not detailed the mechanics.

Why is the London gold still frozen then?

Because a different rule applies. The Fund polled its member states, and a voting majority accepted the Rodríguez administration.

The Bank of England is bound by a British court doctrine instead. That doctrine follows the United Kingdom government’s own recognition, which has not been granted.

Does this make a debt restructuring likelier?

It removes a large obstacle. Sovereign restructurings usually depend on an IMF assessment of what debt level is sustainable, and no such assessment has been possible for around twenty years.

Venezuela’s external obligations are estimated near $170bn.

More: Venezuela news in English, every day from The Rio Times.

Frequently Asked Questions

How did Venezuela regain access to its IMF funds?

Venezuela's access was restored on April 16, when the IMF resumed dealings with Caracas, guided by members holding a majority of total voting power. The freeze had been in place since 2019, when Washington and its allies recognised Juan Guaidó and the institution declined to rule on who governed.

How much does Venezuela hold at the IMF and how much has it requested so far?

Venezuela's reserve tranche and drawing rights at the IMF total roughly $4.9 billion, about SDR 3.6 billion. Caracas announced an initial draw of $200 million for reconstruction, which is about four percent of the total available.

Why does Britain still hold Venezuelan gold despite the IMF resuming access?

Britain has not recognised the current Venezuelan government, so 31 tonnes of gold worth about $1.95 billion remain held at the Bank of England. Interim president Delcy Rodríguez wrote to King Charles requesting the release of the bullion, but the holdout continues separately from the IMF decision.